Kenya’s shilling headed for its lowest level in a year, extending last week’s decline after the central bank slashed interest rates more than expected.
The currency of East Africa’s biggest economy depreciated 0.1 percent to 86.80 a dollar as of 3:53 p.m. in Nairobi, the capital, poised for the weakest since January 2012.
The shilling rallied as much as 0.2 percent earlier as the central bank sold dollars to support it. The bank sold an unspecified amount of dollars in the foreign-exchange market today, an official who asked not to be identified in line with policy, said by phone.
“The central bank is keen to keep the shilling within the 86.50 to 86.70 range and they have intervened by selling dollars in the market,” Duncan Kinuthia, the head of trading at Commercial Bank of Africa Ltd., said by phone from Nairobi.
The Monetary Policy Committee, led by central bank Governor Njuguna Ndung’u, reduced the rate for the fourth time since July, cutting it to 9.5 percent from 11 percent, the Nairobi- based Central Bank of Kenya said on Jan 9. Seven out of 10 economists and analysts surveyed by Bloomberg had forecast a 1 percentage-point reduction.
Kenya’s foreign-exchange reserves decreased to $5.282 billion in the week ended Jan. 10, compared with $5.369 billion a week earlier, the central bank said in a weekly bulletin posted on its website.
“The local unit could weaken in coming sessions if commercial banks respond to the lower base rates with rate cuts of their own,” Nairobi-based NIC Bank Ltd. (NICB) said in a note.
The shilling is expected to depreciate “modestly” to the 88 a dollar level by year end and to 90 by 2014, Morgan Stanley said in a research note released today.
The central bank took 900 million shillings ($10 million) of seven-day repurchase agreements out of bids of 4.9 billion shillings, having offered 4 billion shillings at the sale. The repos are used by the regulator to withdraw money supply from banks and support the shilling.
The Ugandan shilling weakened 0.3 percent to 2,693.85 a dollar, while Tanzania’s shilling weakened 0.9 percent to 1,603.00 a dollar.
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